Job prospects make college loans worthwhile, study says

College graduates, like these from USC, earn much more than young people without degrees, according to a new study.
(Bob Chamberlin / Los Angeles Times)

While more California college students are taking on larger education loans, that investment is paying off with better-paying jobs after graduation compared to young people without a bachelor’s degree, a new study finds.

The “economic returns of attaining a bachelor’s degree are, on average, quite large regardless of major,” said the report by the Public Policy Institute of California. “Average loan debts are relatively low in comparison with the average economic returns to earning a college degree; consequently, paying back student loans should not pose a huge financial problem for the typical college graduate.”

A typical California worker with only a high school diploma can expect to earn about $1 million over a 40-year work life, compared to $1.9 million for someone with a bachelor’s degree, according to the study. Unemployment rates are much higher for young people without a bachelor’s compared to college graduates.


Because of the low tuition at community colleges, the average California student’s loan total is modest compared to those in other parts of the country, according to the study. Only 4% of California community college freshmen and 33% of Cal State freshmen took out loans in 2010, well below national averages; 47% of UC freshmen did, close to the share for public research schools around the country.

Still, those percentages of students with debt are significantly higher than a decade ago, as are the total amounts borrowed. The average annual loan for a Cal State or UC student in 2010 was $5,289, up from about $4,000 in 2007. Also showing significant increases, the annual loan amounts were $7,591 at private nonprofit colleges and, more worrisome, $9,189 at private for-profit schools, the study said.

The report, “Student Debt and the Value of a College Degree,” recommended that the state continue efforts to crack down on private for-profit schools that take in a high amount of student loan revenue but show poor graduation rates. It also urged state campuses to make it easier for students to finish their degrees in four years, thus cutting back on the money they need to borrow for additional time in school. Families should be better informed about their eligibility for federal loans, compared to the more costly private loans that some of them needlessly tap, the report said.

The Public Policy Institute of California is a nonpartisan think tank based in San Francisco that studies economic and social issues in the state.


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